Sunday, April 01, 2007

Containing the following golden rules for the war on cash:1- the stakeholders must agree that substituting debit cards for cash is beneficial to society (This consensus will be hard to reach, as the parties involved do not agree on the true costs of cash and the other payment instruments involved).2- the debit product must be enhanced.3- acceptance of debit cards must be vigorously promoted, both in terms of personal acceptance of cards and in the world of remote commerce (mail and telephone order, e- and m-commerce).4- Banks must develop segmented card offerings,5- Cash needs to be priced appropriately.Today the pricing of cash is not in line with its costs. Consumers and merchants in most countries do not pay the real cost of cash, and so merchants and consumers have no reason to reduce their use of cash. One problem is that there is no clear ownership of cash. Another challenge is that governments often position cash as a public good - to be offered free by banks - thereby inhibiting an economic debate on cash versus other instruments.6- Finally, we will need to see significant targeted marketing efforts to promote debit over cash.